Cantidades óptimas de implementos para las emergencias

Regardless of the route by which they had got into financial difficulty, almost all the participants we interviewed had taken steps to try and resolve their debt problems prior to using a fee-charging debt management company. This typically involved looking for a debt consolidation loan, contacting their creditors, or seeking advice from a free-to-client service. The exceptions seemed to be two people who were both still managing to meet their credit repayments at the time they came into contact with a fee-charging debt management company.

5.4.1 Debt consolidation

Several people had sought to resolve their debt problems by means of a debt

consolidation loan. While some of them only got as far as searching the internet for loan providers, others had applied for loans online. As we discuss in section 5.5, a few participants described how they were contacted by a fee-charging debt management company shortly after making an online loan application. Another participant came across the fee-charging debt management company she used while she was looking for a loan.

A few participants had got as far as taking out debt consolidation loans. One

participant applied for a debt consolidation loan when she discovered her husband’s debt problems (which included mortgage arrears as well as unsecured credit debts), but was turned down.

5.4.2 Negotiation with creditors

It was fairly common for participants to have tried to negotiate reduced payments with their creditors themselves, without any assistance or guidance from an advice provider. On the whole, they reported that creditors were not particularly helpful or sympathetic to their financial situation.67 At best, participants managed to sort out reduced payments with some but not all of their creditors. Others reported that creditors wanted higher repayments than they could afford, or were not willing to consider any payment lower than the contractually agreed amount.

Where participants had not attempted to negotiate with their creditors, they had either not considered this possibility, or were apprehensive of talking to the organisations they owed money to.

I think the thing that stopped me from actually contacting them was, I think it was a fear, being scared… I thought, ‘Well I’ll be in trouble’, I think it was more a fear of getting into trouble with people that I’ve got all the accounts with. (Man, 20s)

67

It is worth noting that some of the participants were reporting events that had occurred several years previously. A number of steps have been taken in recent years to try and improve the way that creditors deal with customers in financial difficulty, including revisions to the Personal Banking Code and the FSA’s Treating Customers Fairly initiative.

5.4.3 Seeking advice

Awareness of free-to-client advice services, and CABx in particular, was high among the participants we interviewed. They divided about evenly into those that went on to seek advice, and those that did not. In contrast, there was very low awareness of CCCS and Payplan in the period before they used a fee-charging debt management company. As we go on to discuss, only one person had contacted a free-to-client debt management company prior to using a fee-charging company.

Reasons for not seeking advice

There were a number of reasons why participants did not seek debt advice from a CAB even though they were aware that it was a source of free advice, and even though several of them had accessed advice for non-debt problems in the past.

A few participants with previous experience of using a CAB were put off by the knowledge that it could be difficult to get an appointment. One participant was also reluctant to discuss her financial difficulties face to face.

I just didn’t feel comfortable enough going to say to them, Look I’m in debt can you help? You know, probably someone over the phone I’m not looking at their face so I can’t see like disappointment if you get what I’m saying.

(Woman, 30s)

Others, both users and non-users, were unsure whether CAB dealt with debt

problems, or what assistance a CAB might provide to someone in their situation. One participant thought he would only receive advice from a CAB, when what he really wanted was someone to sort out his debt problems for him.

I wouldn’t have thought they could have helped too much, they wouldn’t have solved the problem. They would only advise to see such and such, whatever… I didn’t think they could do anything, that’s why I never bothered going there, basically. (Man, 50s)

Finally several participants had become aware of the debt management company that they went on to use, and decided to pursue this route rather than contact a CAB.

Outcomes for advice seekers

Among the group that sought advice from a free-to-client service, the outcomes were mixed. Most of them did not manage to speak to an adviser, mainly because they were unable to get an appointment when they wanted one. One participant was offered an appointment in three weeks’ time, but could not afford to wait this long as he was about to be posted abroad for work. Other participants waited in a CAB for some time, but were not able to be seen by an adviser on that day. They generally did not try again. A few of these participants were given self-help information by the advice service they contacted, which they did not use.

The small number of participants who did speak to an adviser were generally advised to negotiate with their non-priority creditors themselves. They were provided with information and standard letters to help them do this. They all reported only partial success at negotiating reduced monthly repayments.

I think I probably contacted them [creditors], contacted half of them and because I got nowhere I thought oh, you know, sod it I just won’t bother, they don’t care, you know. That’s why I genuinely couldn't see a way out of it at all. (Woman, 30s)

While they were satisfied with the advice they had received, they did not think to go back to the adviser for further help when not all their creditors would accept reduced repayment offers.

I don’t think the citizen’s advice could do any more than what they’d done.

(Man, 60s)

Finally, one participant who received face-to-face advice was referred to an Insolvency Practitioner, with a view to setting up an IVA. His fluctuating earnings meant that he was unable to commit to the £1,000 per month payments that would be required, however. He was subsequently referred to CCCS, who advised him that bankruptcy would be the most appropriate debt solution in his situation. He was unhappy with this advice, as bankruptcy would have jeopardised his job as a financial adviser.